Interest rates are increasing, and Singapore Savings Bond (SSB) has crossed the 2% p.a. mark for its 10-year average returns. The May 2022 SSB gives an annualised 2.09% p.a. return if held for 10 years, and this rate was last seen more than two years ago in the August 2019 tranche.
Even the shorter term returns don’t look that bad; 1.49% to 1.72% p.a. returns if held for at least 24 to 36 months isn’t the worst for something that is quite liquid.
|Year From Issue Date||1||2||3||4||5||6||7||8||9||10|
|Average p.a. return %||0.86||1.49||1.72||1.84||1.91||1.96||2.01||2.04||2.06||2.09|
What is Singapore Savings Bond?
The Singapore Savings Bond is fully backed by the Singapore Government, and offers to provide individual with a safe and flexible way to save. The principal amount and returns are guaranteed, and you can redeem your SSB for cash anytime (subject to the redemption timeline; see How to redeem section below).
A new bond is announced on the first working day of each month, and you can apply for them according to the timeline in the How to apply section.
Interest is paid every six months to your bank account linked to your Central Depository (CDP) account, or your Supplementary Retirement Scheme (SRS) account if you have used your SRS funds to purchase the Bond.
If you place $10,000 in this, you will get $86 of interest over the next year (0.86%), $213 in the second year (2.13%) and so forth. You will get a total of $2,103 paid out to you over 10 years if held to maturity, or 2.09% p.a.
How to apply
To buy the SSB in cash, you need a CDP account (you can open one here). A CDP account is not needed if you are using SRS funds. You can use an ATM to apply for it and potentially annoy people behind you in queue, or apply online via DBS/POSB, OCBC, and UOB’s online platforms.
You can invest in multiples of $500, and the maximum SSB you may hold in total is $200,000. A $2 fee is payable for each application.
Note the application timeline:
|Opening Date||Closing Date||Allotment||Issuance|
|1st business day of month (6PM)||4th last business day of the month (9PM)||3rd last business day of the month (after 3PM)||1st business day of the following month (end of day)|
|1st April 2022 (6PM)||26th April 2022 (9PM)||27th April 2022 (after 3PM)||4th May 2022 (by end of day)|
There is an allotment process as each tranche is limited, so you might not get the full amount you subscribed for. Given the low interest – and popularity – of the SSB over the past couple of years, it hasn’t been oversubscribed in a while (if my memory serves me well).
How to redeem
You don’t have to hold the SSB to maturity, and there is no penalty for withdrawing your funds. There is, however, a $2 fee payable per redemption request, and you can only withdraw in multiples of $500. There is also a timeline to follow:
|Opening Date||Closing Date||Redemption of Bonds|
|1st business day of month (6PM)||4th last business day of the month (9PM)||2nd business day of the following month (by end of day)|
“2.09%? You will never become rich”
A YouTube commenter expressed their disdain for the rates, saying that one would never be rich from this. He/she isn’t wrong, but nobody ever got rich from putting their cash in the bank either. SSB is more like a cash equivalent with slightly higher rates than fully liquid bank deposits, and is a pretty okay place to put a few months of emergency savings in.
Given how the rates of insurance savings accounts and bank deposits have all fallen with not sign of recovery as interest rates rise, this may be a viable option for people who are looking for a low-risk product to place their funds and still enjoy a great amount of liquidity.
The liquidity of this means you don’t have to worry about your funds being locked up for a long period, although you may not want to place 100% of your emergency funds into it due to the fact that you have to wait almost a month to get your funds if you make a withdrawal at the start of each month. It may be more prudent to have at least one to two months’ worth of funds in your bank account before putting the rest into SSB.
It’s also a pretty decent place to put your idle SRS funds. Personally, I contributed a lump sum towards my SRS at the end of 2021, and have been dollar-cost-averaging those money into investments. SSB would be a great place to temporarily keep some of my idle SRS funds until they are ready to be deployed.
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